Part D allows employer or union group health plan sponsors to enroll Part D eligible individuals in PDPs or MA-PD plans that are designed and open only to individuals affiliated with these sponsors. CMS publishes enrollment numbers for these employer-only plans, but does not release benefit design characteristics. As a result, employer-only plans are excluded from much of the analysis in this report.

This report is being released along with a companion article in the journal Health Affairs; see John F. Hoadley, Juliette Cubanski, and Patricia Neuman, "Medicare Part D Drug Benefit At 10 Years: Firmly Established But Facing Challenges," Health Affairs; October 2015. Analysis from previous years of the Medicare Part D program conducted by the authors is available at www.kff.org.

There is evidence that Medicare Advantage enrollment growth (as a whole, beyond Part D) reflects decisions by baby boomers newly eligible for Medicare, but also small shifts in the larger pool of current beneficiaries switching from traditional Medicare to Medicare Advantage plans. Gretchen Jacobson, Patricia Neuman, and Anthony Damico, “At Least Half of New Medicare Advantage Enrollees Had Switched From Traditional Medicare During 2006-11,” Health Affairs 34(1): 48-55, January 2015.

This look at market concentration focuses on the total program, including both PDPs and MA-PD plans. Other analysis shows that enrollment in Medicare Advantage plans (including plans that do and do not offer the Part D benefit) is concentrated in a handful of firms, with two firms (UnitedHealth and Humana) having 39 percent of Medicare Advantage enrollment. Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Enrollment Market Update,” June 2015, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-spotlight-enrollment-market-update/.

The marketplace analysis in this section, unlike other parts of the analysis, incorporates both PDPs and MA-PD plans and includes plans in the territories and plans offered exclusively to retirees from a particular employer.

According to current guidelines used by the Department of Justice and the Federal Trade Commission, the Part D market is not concentrated. The guidelines indicate that markets in which the index is between 1,500 and 2,500 points are considered to be moderately concentrated. Those in which the index is in excess of 2,500 points are considered to be highly concentrated.

This count excludes plans without drug coverage and all cost plans. It also excludes drug plans offered by Special Needs Plans (SNPs), a type of Medicare Advantage Plan that limits membership to beneficiaries with specific diseases or characteristics, and Medicare-Medicaid plans (MMPs) participating in the financial alignment initiative (known as dual demo plans). In 2015, 533 SNPs (excluding the territories) and 332 MMPs are offered.

Section 2: Part D Premiums

The 2015 average reported here ($37.02) is lower than the amount reported in the 2015 “First Look” spotlight ($38.83) because the new average is weighted by actual 2015 enrollment. Jack Hoadley et al., “Medicare Part D: A First Look at Plan Offerings in 2015,” October 2014, available at http://kff.org/medicare/issue-brief/medicare-part-d-a-first-look-at-plan-offerings-in-2015/. The average amount is lower because net switches in plan enrollment in the fall open enrollment season (including LIS beneficiaries reassigned to new plans by CMS) were to lower-premium plans. Averages for some previous years differ by small amounts because different months are used for comparability.

The average premium excludes Special Needs Plans (SNPs) and Medicare-Medicaid plans participating in the financial alignment initiative (known as dual demo plans). The average Part D premium for SNPs ($22.95) is higher than the MA-PD average, but most costs are incurred by the government since 90 percent of SNP enrollees are LIS beneficiaries. Zero premiums are reported for all MMP plans, which are only open to Medicare-Medicaid beneficiaries. The overall premium in 2015 for MA plans (including services for Parts A, B, and D) that include drug coverage is $38 per month, up 7 percent from 2014 but down 14 percent from 2010; see Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Enrollment Market Update,” June 2015, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-spotlight-enrollment-market-update/.

Information on these rebates is not available at the plan level. CMS (personal communication) calculated that the average MA-PD premium prior to rebates in 2015 was about $3 per month lower than those for PDPs, down from $6.68 in 2014 and $9.50 in 2013.

Our estimates for MA-PD plan sponsor shares of enrollment are slightly different from enrollment estimates in another Kaiser Family Foundation issue brief. Gretchen Jacobson et al., “Medicare Advantage 2015 Spotlight: Enrollment Market Update,” June 2015, available at http://kff.org/medicare/issue-brief/medicare-advantage-2015-spotlight-enrollment-market-update/. That analysis included enrollees in Medicare Advantage plans that do not include Part D coverage. Our enrollment shares include employer plans.

Cost-sharing differentials across pharmacy types do not apply to LIS beneficiaries, because LIS cost-sharing amounts are set by law and updated in regulation each year. The government, however, is responsible for the higher cost sharing if the LIS beneficiary uses a pharmacy that does not offer preferred cost sharing.

These results are from analysis for MedPAC, conducted by Elizabeth Hargrave and Katie Merrell (see Methodology note). For that analysis, the universe of drugs includes all unique chemical entities in the CMS reference file. For example, plans are considered to cover a drug if they cover any version of drug, for example if they cover a generic version but not the brand version or if they omit certain forms or strengths of the drug. Formulary data were unavailable for plans under sanction at the time of the annual enrollment period.

Plans must list at least two drugs in every drug category and class, as well as most or all drugs in six protected classes. See CMS, Chapter 6, “Part D Drugs and Formulary Requirements” in the Medicare Part D Manual, available at http://www.cms.hhs.gov.

These results are also from the analysis for MedPAC (see Methodology note). That analysis classifies a drug as having a particular type of utilization management if that characteristic applies to any form or strength of the drug that is on the lowest possible tier used by that plan for that drug.

For example, in 2015, enrollees in different benchmark PDPs sponsored by Cigna in 16 regions were consolidated into a single benchmark PDP as a result of the acquisition of HealthSpring by Cigna in 2012.

In addition, enrollees in MA-PD plans that exited the market are classified as reassigned to a new PDP by CMS, but are not included in our counts. Many of these were reassigned to PDPs operated by the same sponsor as their MA-PD plan, unless they chose another MA-PD plan. Those who had no PDP available from the same sponsor were randomly reassigned to a PDP.

Section 5: Part D Performance Ratings

Star ratings are assigned at the contract level, not the plan level, and many plan sponsors operate all their PDPs under the same contract. Thus, Humana’s older and more expensive Enhanced PDP, the Preferred Rx PDP, and the newly offered Walmart Rx PDP are all assigned the same ratings even if enrollees in one plan rate them differently on satisfaction measures or have different outcomes.